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Title transfer collateral arrangement: Difference between revisions
Title transfer collateral arrangement (view source)
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{{ | {{a|security|}} | ||
A {{tag|collateral}} arrangement whereby, instead of instigating a [[pledge]] or [[security interest]] of some kind, a debtor provides cash or [[financial collateral arrangement|financial collateral]] to its [[creditor]] by means of [[title transfer]] against a [[Contingencies|contingent obligation]] on the creditor to return an [[equivalent]] security should the [[exposure]] be resolved. | A {{tag|collateral}} arrangement whereby, instead of instigating a [[pledge]] or [[security interest]] of some kind, a debtor provides cash or [[financial collateral arrangement|financial collateral]] to its [[creditor]] by means of [[title transfer]] against a [[Contingencies|contingent obligation]] on the creditor to return an [[equivalent]] security should the [[exposure]] be resolved. | ||
Known, for the purposes of the [[Financial Collateral Directive]], as a [[title transfer financial collateral arrangement|title transfer ''financial | Known, for the purposes of the [[Financial Collateral Directive]], as a [[title transfer financial collateral arrangement|''title transfer'' financial collateral arrangement]]. But it’s the same thing among us finance lawyer freaks, and contrasted sharply with a [[security financial collateral arrangement|''security'' financial collateral arrangement]], which is a whole different thing. | ||
===The SFTR disclosure=== | |||
This has profound — some might say a bit barmy — consequences when one considers the {{eureg|2015|2365|EC}} (also known, stiffly, as [[The Regulation on Transparency of Securities Financing Transactions and of Reuse]], more casually, as the [[securities financing transaction regulations]] and fondly as {{tag|SFTR}}) which, at Article 15, have some things to say about {{tag|title transfer}} collateral arrangements and what you have to tell your counterparty about them. | This has profound — some might say a bit barmy — consequences when one considers the {{eureg|2015|2365|EC}} (also known, stiffly, as [[The Regulation on Transparency of Securities Financing Transactions and of Reuse]], more casually, as the [[securities financing transaction regulations]] and fondly as {{tag|SFTR}}) which, at Article 15, have some things to say about {{tag|title transfer}} collateral arrangements and what you have to tell your counterparty about them. | ||
===CASS rules=== | |||
The CASS rules impact on title transfer collateral arrangements, albeit tangentially: strictly speaking, a title transfer collateral arrangement is not a client money arrangement. but it is ''like'' one: an “arrangement by which a client transfers full ownership of money to a firm for the purpose of securing or otherwise covering present or future, actual, contingent or prospective obligation”. This sounds a lot like receiving money from, or holding money for or on behalf of a client, in connection with (etc etc) its MiFID business — except that by cleverly constructing it as a title transfer collateral arrangement, you are subtly changing it into a [[contractual liability]] (not a regulated deposit taking activity), and not a kind of [[bailment]], which is what the client money rules bite on. Reluctantly, for [[professional clients]], the CASS 7 rules give brokers a pass, but they prohibit [[title transfer collateral arrangements]] with [[retail client]]s. | |||
As indeed do the {{tag|CASS}} rules, especially if your | As indeed do the {{tag|CASS}} rules, especially if your counterparty should ask for you to change or terminate one. | ||
Note also, there is a genus of lawyer (''[[Causidicus mediocris]]'') who frets that a [[TTCA]] might be [[recharacterised]] as a [[pledge]], with [[Omega|apocalyptic consequences]]. | Note also, there is a genus of lawyer (''[[Causidicus mediocris]]'') who frets that a [[TTCA]] might be [[recharacterised]] as a [[pledge]], with [[Omega|apocalyptic consequences]]. | ||
{{sa}} | |||
*[[Financial Collateral Directive]] | *[[Financial Collateral Directive]] | ||
*[[pledged collateral arrangement]] | *[[pledged collateral arrangement]] | ||
*[[credit risk mitigation]] | *[[credit risk mitigation]] | ||
*[[Chicken Licken]] | *[[Chicken Licken]] | ||